Select Committee on Trade and Industry Minutes of Evidence

Examination of Witnesses (Questions 440 - 459)



  440. In the memorandum we had from you jointly, you said that the government aims to shift the burden of tax from "goods" such as labour and capital to "bads" such as pollution. What evidence do you have to show that high fuel taxation has positive environmental benefits?
  (Mr Timms) Our assessment is that by 2010 the volume of emissions into the atmosphere will have been reduced by between 1 and 2.5 million tons of CO2 emissions. So it is a significant contribution towards us achieving our Kyoto targets and the domestic target for CO2 emissions reduction that we have set.


  441. Surely by 2010 lean burn vehicles will have replaced the old dirty ones anyway, so what is the significance of the taxation on that? People buy the vehicles they can afford if they are available, so they are going to be available in ever greater numbers. You will not go and buy a dirty vehicle when you can buy a clean one, surely?
  (Mr Timms) The point about fuel duty is that it increases incentives for people to purchase vehicles that are fuel efficient, and we are seeing that happening at the moment.

  442. But what happens to the road haulage company that is toiling at the moment? They have difficulties; and so they decide that they are going to hold on to a vehicle for six months longer than they would have done because they do not have the money to replace it. Is this not one of the deleterious effects of high taxation, that in fact it acts as a disincentive to investment because people do not have the money to pay for the new vehicles?
  (Mr Timms) The evidence I have seen from hauliers is that they can and are getting quite rapid pay-backs from up-grading their vehicles, because the extra fuel efficiency that you can achieve from a newer vehicle is very substantially greater and so I think that is actually providing an increased incentive for them to renew their vehicles. Again, this is one of the issues we are looking at in the context of the £100 million three-year fund, but I think one can argue this both ways and make the point that the current levels of fuel duty provide greater encouragement for hauliers to obtain more fuel-efficient vehicles because the payback they get from that is greater.

Ms Perham

  443. With respect, Mr Timms, I think the answer you gave to me before the Chairman came in was more an aspiration than evidence. I am just wondering what measurements you use to see that high fuel taxation has positive environmental benefits? Fewer vehicles on the road? Less fuel consumed? Less commercial miles travelled? Have you any evidence that that policy is working?
  (Mr Timms) Yes. Less fuel than would otherwise have been the case. I am not saying that the amount of fuel being consumed is reducing but I am confident that the amount of fuel being consumed is less than it would have been if fuel duty had been lower. If price goes up then demand goes down, and there have been very substantial pieces of work that have looked at this. The DTI have done some work and so have the DETR, and that is the basis for the range of estimates I gave to you—that by 2010 between 1-2.5 million tons of CO2 emissions are reduced as a result of the operation of the fuel duty escalator since 1996. I want to emphasise, however, there has been serious analysis carried out to lead to that conclusion.

  444. And is there anything you can give to this Committee that you have not already put in this submission to support what you have just said?
  (Mr Timms) I can certainly send information that gives a bit more detail about the work that has been done. I would be glad to.

Mr Cunningham

  445. Moving on to cabotage, the Road Haulage Form commissioned a study to see whether cabotage exists. Have you seen that and, if you have, what do you think of it?
  (Mr Timms) This is the study the government commissioned in discussion with the Road Haulage Forum, and I have been at meetings of the forum where that has been discussed. It is very important, I think, to make the point that the methodology, as you have indicated, for that study was agreed with the industry representatives on that Forum. As you know, it concluded that cabotage only accounts for about 0.06 per cent of the UK domestic haulage market. It is a very small element.

  446. Are you still confident about that figure?
  (Mr Timms) Yes. I think we were very careful to measure it in a way that the industry agreed with, and so I think we can be confident that it is a robust estimate. There are other foreign hauliers on UK roads—the 0.06 per cent figure just refers to domestic haulage being carried out by overseas lorries—but I think as an estimate of that phenomenon 0.06 is a robust figure.

  447. Do you think the increase of traffic coming in from abroad is still a major problem?
  (Mr Timms) It is the case that hauliers face significant pressures—there is no question about that—and, indeed, we are seeing greater competitive pressures in large parts of the economy and we welcome that and want to encourage competition across the economy. We have been concerned, however, with the industry on competitiveness and that is really the background to the very substantial package of measures that the Chancellor announced in November , which I think will give a significant boost to UK hauliers. One of the measures that the industry is particularly keen on is the introduction of a vignette for lorries operating in the UK and we are going to introduce that. We are working with road haulage organisations at the moment on the details of how that will operate, but it will be introduced in a way that does not add any extra costs to UK firms but will mean that firms, hauliers, lorries, coming in from other countries and operating in the UK will have an additional cost to obtain a disc.

  448. Are you concerned that the continental hauliers may be breaking the rules?
  (Mr Timms) Which rules are you referring to?

  449. EU rules.
  (Mr Timms) I am not sure which rules you have in mind. It is sometimes indicated that there may be drivers from outside the EU being employed illegally to drive vehicles within the UK. That is an issue that we have been concerned about along with other EU member states, and the vehicle inspectorate does carry out checks on drivers and vehicles as part of routine enforcement, so we are checking that. I am not saying there are never any violations—I am sure there are. It is a legitimate concern and we are taking steps to do what we can to check what is happening in the UK.

  450. Do you monitor it in your department? Do you use the Road Hauliers' Association for that type of information?
  (Mr Timms) Specifically the question about non-EU drivers?

  451. Yes.
  (Mr Timms) That is the responsibility of the vehicle inspectorate that reports to the DETR, and they do carry out checks.


  452. Have there been any violations that you are aware of?
  (Mr Timms) My understanding is that we are aware that some companies are employing drivers from outside the EU, thereby avoiding paying the appropriate taxes and being able to undercut legitimate companies, so I think there is some evidence that that is happening. As I say, the vehicle inspectorate is carrying out checks as part of its routine enforcement work and in addition, in response to approaches from us and other member states, the European Commission has published proposals aimed at combatting EU haulage companies illegally employing drivers in this matter, and avoiding taxes as a result.

  453. Have any companies been prosecuted successfully in the UK?
  (Mr Timms) That I do not know. DETR would compile that information, but I am sure we could obtain it and send it to you.

  454. It has been suggested perhaps that the haulier Willie Betts is a particular problem in this area and one would imagine that, if people like us have got this information, it will be common place elsewhere. I think that there is a sense here that there is a bit of hand-ringing and not much else going on. It is quite serious, not just in terms of the interests of the British haulage industry but also British citizens, in terms of road safety if unqualified, unauthorised drivers are driving these massive trucks about the country.
  (Mr Timms) Yes.

Mr Laxton

  455. Can I turn to the issue of what is alleged over-capacity in the haulage business? Lord Macdonald wrote in October of last year to John Bridge of the Road Haulage Association suggesting a figure of 20 per cent over-capacity in the business, and the Road Haulage Association said that there would need to be some further work to look at this. Do you agree with the figure, firstly, of 20 per cent, and has any further work been undertaken in this particular area to see how the issue of over-capacity can be addressed?
  (Mr Timms) I do not think we have made an estimate of the extent of over-capacity. Indeed, the view we take is that, if you have an open and competitive industry, then the problem of over-capacity will, in any case, be one that corrects itself. What we are wanting to do, and what the Forum has enabled us to make some progress in doing, is to work with the industry in addressing the problems that it faces. We do not think there is a single remedy or a quick fix but, through the measures that the Chancellor announced in November and the discussions we are having about the use of the £100 million three-year fund, we think we can work with the industry to help it through what is undoubtedly a difficult time and contribute to developing a commercially viable and environmentally sustainable UK haulage industry for the long term. On the specific question of the extent of over-capacity in the industry, we do not have a figure that we regard as an authoritative one.

  456. I assume this figure of 20 per cent was not plucked out of the air by Mr Macdonald. We have received some oral evidence where people have said, for example, that lots of haulage companies were going out of business and being driven out by the high cost of fuel yet, on the other hand, we did not see from our perspective any empirical evidence in terms of vehicles being taken off the road. Maybe the companies going out of business are selling them on. You do not really accept, therefore, that there is a endemic problem of overcapacity; and could that be the reason why there is pressure upon the haulage industry?
  (Mr Timms) There may well be over-capacity. There is conflicting evidence here because another point that people often make is that there is a shortage of drivers in the UK, and a shortage of trained people, so I think the position that the haulage industry finds itself in is quite a complicated one. There are many different factors and influences that are affecting current conditions in the industry, and I would be very loathe to say that the problem is overcapacity or any one of the issues. I think we have to recognise the breadth of the issues the industry faces and work with the industry in developing a more sustainable future.


  457. You say that maybe there is over-capacity, maybe there is not, but a 20 per cent estimate by one minister seems to suggest that there is a bit of overcapacity. If you said it was 5 per cent, it might be regarded as negligible, but when somebody is talking about 20 per cent and he is talking about one part of this joined-up government, one would imagine that your department, which prides itself being at the heart and knowing everybody else's business, would know whether that is right or not, for God's sake?
  (Mr Timms) I am certainly not saying that there is no problem of overcapacity. I am simply making the point that I think it is important to recognise the full range of the factors that are affecting the industry at the moment. I think different people would have different views on the extent of the over-capacity.

  458. But would the Treasury regard the road haulage industry as being particularly efficient?
  (Mr Timms) I think you are now inviting me to trespass on other people's property.

  459. It is not a reticence you have shown in the past!
  (Mr Timms) I think there are very efficient operators in the UK haulage industry. I think we have some of the most efficient logistics companies in the world operating based in the UK. There are also no doubt other companies that do not operate efficiently. It is a very variegated industry and I think it is quite hard to make valid generalisations about the conditions that you will find ranging from one person who owns their own lorry in one part of the industry—and there are lots of those—to very large and very sophisticated big operators on the other.

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